Middle East crisis to impact Romania’s economy through inflation, risk-aversion

The Middle East crisis will most likely impact the Romanian economy, as well as the other economies in the region, through two main channels: higher oil and gas prices maintaining inflation at elevated levels, hence deferring expected rate cuts with an impact on growth (also impacted directly from the higher energy prices), and investors’ higher risk-aversion typical in such circumstances adding to the country’s borrowing cost that was en route to declining.

Romania’s long-term (10-year) local currency bond yields rose to 6.4% on March 2 from under 6.3% at the end of last week (February 27) – which was the lowest level in several years.